I was trying to run my Arduino using an external 5V @ 1A power supply (http://www.sparkfun.com/products/8269), but I am only able to measure 3V from the 5V pin on the board!

My Arduino is set up to run Auduino (simple FM synth), which outputs to a .5W 8 ohm speaker directly. I am currently building a small external class A amplifier to boost the volume a bit more, but am curious about the power problem.

When I run off of USB, I get a full 5V and the speaker is nice and loud. When I switch the power selection jumper to EXT and plug in my power supply (and remove the USB of course), I measure 3V at the 5V pin, the speaker is noticeably quieter and the sketch seems to be running slower in general. I thought the USB protocol only allowed for a max of 500mA to be drawn by one device, whereas my power supply is capable of 1A. Any ideas?

You can't plug a 5V regulated power supply into the DC power jack. The onboard 5v regulator needs a voltage of at least 7.5 volts to regulate down to 5. Since your power supply is regulated you can connect it to the 5V and Ground pins directly (Ground to the outer barrel and 5V to the center hole).